LBO newbie

Hi everyone!

I recently got introduced to the LBO model and wanted to ask you a couple of clarifying questions. How do you come up with the price you have to pay for the target. Do you build a three statement model and use it to perform DCF/comps to value it and then adjust depending on the situation or some other methodologies are used?

To learn more about the process, are there any good LBO investment decks that are circulating online. I wanted to see how investors think when they present LBOs.

Thanks!

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Comments (4)

May 10, 2021 - 2:42pm

The LBO is a dynamic model that allows you to see different scenarios after inputting certain assumptions. 

1. You could assume a certain purchase price based on DCF or comps multiples and then calculate the IRR if you were to purchase at the said price.

2. You could also assume a "target IRR" (maybe 20-30%) and then figure out the maximum price you can pay to achieve the "target IRR". 

Check out 10xEBITDA for presentation examples. 

Most Helpful
May 10, 2021 - 9:43pm

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